Inflation and Manufacturing Output in Nigeria

Abstract

Over the years, the government of Nigeria has made several efforts to develop the manufacturing sector, yet the sector has continued to perform poorly, becoming increasingly weaker presumably on account of inflationary pressures accompanying the import of manufactured goods. This work is therefore aimed at investigating the impact of inflation on the manufacturing sector output in Nigeria using time series data obtained from Central Bank of Nigeria (CBN) statistical bulletin, National Bureau of Statistics (NBS), World Bank Development Indicators (WDI) and World Economic Organization (WEO). The Autoregressive Distributed Lag (ARDL) bound test approach was adopted. The result revealed that inflation rate was correctly signed and thus had a negative effect on the manufacturing sector output, although this proved to be statistically insignificant. The paper recommended that government should encourage investors in local raw materials through direct incentives, and overhaul access to credit for the productive sector particularly the manufacturing sector.

Keywords: Manufacturing Output, Inflation rate, Exchange rate, Sectoral credit allocation.

JEL: E31 O14